College student with grandparent

Making Gifts to Grandchildren for College Savings Plans

The path to higher education is becoming increasingly costly. A high percentage of graduates find themselves navigating the early years of their careers while shouldering heavy, even unbearable, loads of student debt. For many, this debt follows them into middle age. This reality underscores the importance of early financial planning for education. That’s why at Surprenant & Beneski, P.C., we know that the gift of higher education is one of the most far-reaching legacies a grandparent can provide. 

Grandparents, by stepping in to help fund their grandchildren’s college education, provide their beloved heirs with a substantial advantage as they begin their adult life. Higher education expands their horizons, fosters their career advancement, and enriches their lives and the lives of future generations.

Ways to Gift Grandchildren With Funds for Education

Educational funding is complex, requiring a strategic approach that our attorneys are well able to supply. Our comprehensive knowledge and experience will assist you in deciding which of the following methods will work most efficiently and cost-effectively in your particular case:

529 College Savings Plans

A popular and practical choice, 529 plans offer tax-advantaged savings options specifically designed for educational expenses. Not only do contributions to a 529 plan grow tax-free but withdrawals used for qualified education costs are not taxed. Grandparents can open a 529 account naming a grandchild as the beneficiary or contribute to an existing account, potentially sidestepping gift taxes through techniques such as five-year front-loading (using the five annual gift tax exclusions all at once).

Custodial Accounts (UGMA/UTMA)

The Uniform Gifts to Minors Act (UGMA) and the Uniform Transfers to Minors Act (UTMA) accounts allow grandparents to gift assets to their grandchildren in a custodial account. These accounts are more flexible in terms of fund usage compared to 529 plans. However, it’s important to note that once the grandchild reaches the age of majority, the funds become their property to use as they see fit.

Trusts for Education

For grandparents seeking more control over the distribution and use of the gifted funds, 

setting up a trust is an ideal option. Trusts give grantors the ability to control when funds will be distributed, requiring, for instance, that their grandchildren complete particular tasks in order to access their inheritance.

There are also trusts designed to handle specific situations. For example, special needs trusts ensure that grandchildren with special needs will receive the support they need without losing their eligibility for government benefits. In a similar way, spendthrift trusts are crafted to protect the assets of youngsters who are irresponsible with money. 

How Our Attorneys Will Help You Gift Your Grandchildren in the Most Effective Way Possible

At Surprenant & Beneski, P.C., our commitment to family and future generations keeps us focused on tailoring our estate planning services to meet your individual goals and specific needs. We will discuss your personal concerns and create plans customized to address them in order to maximize the impact of your gift while minimizing any potential tax implications.

Services we provide include:

Guidance to Choose the Right Plan

We’ll help you navigate the differences between 529 plans, custodial accounts, and trusts, ensuring that your choice aligns with your financial goals and the educational needs of your grandchildren.

Trust Formation and Management

We are adept at drafting, reviewing, and executing the necessary documents to establish special needs or spendthrift trusts, ensuring your gift is well-structured and carefully worded to achieve your goals.

Planning for Tax Implications

We’ll provide insight into the tax benefits and potential liabilities associated with each type of gift, helping you make informed decisions that benefit both you and your grandchildren.

Give Yourself a Gift: Contact Surprenant & Beneski Today

Empowering your grandchildren with the gift of education is an enduring act of love. With the support of Surprenant & Beneski, P.C., you can rest assured that your contribution to their future is structured to offer the greatest benefit, paving the way for a lifetime of opportunities. Contact us for a consultation today.